Apple threatens to shut down iTunes if Artists get royalty increase

Apple Insider has a report about how regulators are considering a royalty hike for artists who actually write and perform the music that we listen to. Apple, who distributes more of it than anyone else, and the record labels who market it, are extremely upset about this idea.

The rate increase could actually change it so that artists receive 9 cents to 15 per music track from digital downloads. In response to this, Eddy Cue, the head of iTunes, had this to say: “If the [iTunes music store] was forced to absorb any increase in the … royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss – which is no alternative at all,” Cue wrote. “Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably.”

The Digital Media Association (that represents Apple and other digital retailers) wants the percentages dropped to a rate of 6% which would pay artists only 4.8 cents per track.

The record labels would like to see it dropped down to 8%.

I’d like to see the record labels go out of business and let the artists deal directly with Apple the way developers do — but they didn’t ask me.

This is yet another item of news that we’ve seen recently that does not reflect well on Apple. Coming out against artists and threatening to shut the store down is just plain bad press.

UPDATE:Cult of Mac has some clarification on this and apparently its an old quote. I don’t think that completely dismisses it, however. The quote is only a year old its not like this is a quote from 2003.

Comments

There’s several things left unsaid in here that has been “out there” about this debate. Many of them derogatory of Apple. Your title here suggests the same, but thankfully your article doesn’t.

For every 99 cent song sold on the ITMS, 70 cents goes to the labels. That leaves Apple 29 cents to work with. That pays for bandwidth, content distribution of both music and podcasts, personnel, storage, servers, data centers, etc. The labels don’t want to lay out an extra amount to the artists even though they are receiving the lion’s share of the money from every song sold. Hence, “let’s get Apple to do it” and “we can even make them look like money-grubbing bastards in the process” has become the modus operandi of the labels.

In this day and age of artists able to completely perform, record, post, mix-down, and print their own media, and having a content distribution mechanism such as the ITMS, there IS NO NEED for labels any more. Once *they* realize it, maybe they’ll go away, and let the market re-adjust to today’s technology.

And yes, I *am* an artist, and *have* done recordings this way, and we did nicely even though we were relatively unknown except in our region.

I don’t think all artists are capable of being successful without marketing help. What they need are marketing services to help them promote themselves – they don’t need labels that take all of their money. Some artists have a good business sense, and can do everything on their own – others may need assistance in how to market themselves properly…but either way, the artist should be making the majority of the money on their music, not the minority.

I think Apple would keep the store around for the sale of Applications. But I do think it is a better idea to let the artists deal directly with Apple like the developers do for Apps. I the long run I think Apple will make more money from Applications anyway. I think the iTunes store has helped with piracy. I know of some people who have decided to just use iTunes. I like to take that jar of coins to my local grocery store and use Coinstar to get an Apple iTunes gift card. When you use Coinstar for cash you pay. When you use it for gift cards it is free.

This is just a warning to people as I see it. One of these days the Lables, RIAA ,or something else may raise the cost or do something else to Apple and in return causes Apple to shut down iTunes. Those that has purchase music ( with DRM ) will then be in the same boat as people who purchased music from Yahoo, Microsoft, and Walmart . They discontinue the DRM servers and your stuck no more music. Sure there are ways around this for the computer savay but there are a lot of folks that will just be out of luck and not be able to listen to their music that they legally purchased. So if you are buying music from Apple iTunes at least make sure its the DRM free tunes. I have never purchased a single song from iTunes but My Daughter has with a monthly allotment I give her for music. I have her keep track of the songs she downloads with the DRM, which is not very many from my drilling it in her head, but once she gets enough songs she then burns them to audio cd to rip the DRM . I would admit that iTunes is probably not going anywhere in the near future but it IS time for DRM music to go away NOW.